Cadbury Schweppes Plc., a soft-drinks and confecitonary manufacturer and marketer, is on its crossroads from an international growth perspective. A snapshot provided in the report thereafter shows that with its revenues going into billions it is too large to be just a regional niche player but aswell, it is way too small to really compete equally with it key global compeitiors, such as Coca-Cola and Pepsico on the one side of her business and Mars, the world’s leading confectionery manufacturer or Unilever’s chocolate and ice
cream manufacturer on the other side.
But still, the way forward for Cadbury Schweppes is “grow or go”. “Go” - this would mean a partial divestiture of its operations - would just be a last resort. Thus, in order to get into the “grow”-mode, Cadbury Schweppes needs to find its own way to expand internationally.
This report suggests that it should look at the world not only from a regional perspective as it does today but re-assemble its unique capabilities - Confectionery and Soft-Drinks - put it together and start segmenting its operations from a new, segmental focused business perspective.
Contents:
Executive Summary
Current Situation
Analysis of Current Situation
Finance - a helicopter view
Strategy
Key success factors
International Operations of Cadbury Schweppes
Future Directions
Broad industry trends
The future Strategy for CSG
Conclusion
References
Executive Summary
Cadbury Schweppes Plc., a soft-drinks and confecitonary manufacturer and marketer, is on its crossroads from an international growth perspective. A snapshot provided in the report thereafter shows that with its revenues going into billions it is too large to be just a regional niche player but aswell, it is way too small to really compete equally with it key global compeitiors, such as Coca-Cola and Pepsico on the one side of her business and Mars, the world’s leading confectionery manufacturer or Unilever’s chocolate and ice cream manufacturer on the other side.
But still, the way forward for Cadbury Schweppes is “grow or go”. “Go” - this would mean a partial divestiture of its operations - would just be a last resort. Thus, in order to get into the “grow”-mode, Cadbury Schweppes needs to find its own way to expand internationally.
This report suggests that it shoud look at the world not only from a regional perspective as it does today but re-assemble its unique capabilities - Confectionery and Soft-Drinks - put it together and start segementing its operations from a new, segmental focused business perspective.
Current Situation
Business Overview
Cadbury Schweppes (CSG) is principally engaged in the manufacture and distribution for sale of branded beverages and confectionery, and related foods, supplied through wholesale and retail outlets of the confectionery, licensed, catering and grocery trades throughout the world. Its headquarters are based in London, UK and CSG has been built out of a takeover merger some years ago of the former French-based drinks manufacturer Schweppes S.A., which has been swallowed by Cadbury Plc, mainly a confectionery manufacturer.
Still, even some several years later, this heritage does exist - drinks are virtually not sold in the UK; confectionery is mostly sold in the UK; and then it has been later through good and not so good acquisitions of market niche players in (rest of) Europe and the US
A material change has happened in 1998 through the acquisition of the Dr. Pepper soft drinks brand in the US: and the formation of DSPU, this, even though this did not materially reflect into revenue growth or profit growth so far, is probably the most impactful change the last years.
The stock valuation of CSG is shown in relative terms compared to 1995 in Graph1 (blue), also in relative vale to Coca-Cola Enterprises (CCE), the most important competitor in the soft drinks arena and - as analysts argue - probably the most valuable brand / brand name in the world.
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Graph 1 : Chart of Cadbury Schweppes (US ADRs) measured against Coca-Cola Enterprises, currency fluctuations included
It can be seen from that chart that apparently CSG did not do that well (at least until July 1999) as Coca-Cola did, and still, even though Coca-Cola had a sharp decline in its stock (caused by strong centralism, management changes and uncertainty - which is due to be rebound now) - still, and investment in CSG the last years only brought an average stock growth of 10%. Thus, further analysis at this apparently under performing company needs to be done.
Analysis of Current Situation
CSG, looking at their balance-sheet is a very marketing-intensive corporation, and indeed, 20% of its revenue go into marketing expenditure (“investment”) in average. Thus, besides its production and headquarters facilities, a special focus will be taken on how Cadbury Schweppes goes into different markets and if it succeeds or fails to take a multi-domestic, multi-market strategy, so far. This starts with a financial overview (a ex-post analysis with some future projections), then looks at the strategy and operations of the company and if it is suitable to guarantee sustainable revenue growth with a special consideration onto international marketing and international operations.
Finance - a helicopter view
From a financial standpoint, seen year over year, the last annual report does not say a lot about CSG. Over a five-year perspective, it shows that CSG had revenue decline and its Earnings Per Share could do better, compared to the rest of the industry (Table 1). Still, the EPS growth rate, according to the FirstCall Consensus is at about 10% below the industry average, an industry of course that includes household names such as Coca-Cola or Pepsi. Still, looking back does not mean a lot about future development.
Table 1: Company Snapshot1
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Table 2: Company Performance ($mil)
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The company itself did not grow the last years and probably had its best year in 1997 with an EPS of 3,52 $. Interestingly enough, despite the fact that through divestment and structural changes the revenue did decline significantly these last years, the EPS growth could be maintained somehow and was positive in stark contrast to a slightly declining industry growth rate. But still, CSG seems to be an “unpredictable” candidate for projecting earnings, which investors generally hate - and might be a reason for this rather under performing stock quotation.
Table 3: Key Measures (09/08/00)
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Table 4: Pricing Momentum (09/08/00)
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Still, the company is predictable in its under performing stock price and the beta factor (a sign of volatility, here, against the S&P (Standard & Poors) stock index, does show that over time, CSG investors need to be hard-necked.
Still, analysts are in a wait-mode situation towards the company with a slight positive but still rather neutral view2, which then reflects the first-call recommendations for the future.
Table 5: First Call Analyst recommendation chart, (09/07/00)
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Strategy
Looking at today’s strategy of CSG, it needs to be evaluated if it can generate internationally rents that over time would be sustainable.
From an historic perspective, CSG falls into two parts which might be explained through Porter’s diamond. Schweppes, originally over decades very strong in Belgium and France might have originated from the cultural need of more Latin and southern countries for cold refreshing drinks as a substitute for heat. Due to that reason, the beverages arm is very strong in continental Europe (prior to acquisition of DPSG in the US), also caused by fierce competition in that country either through global names such as Coca-Cola or Pepsi or through local competition such as Orangina.
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Figure: Porter’s Diamond
The confectionery arm stems from the UK, which historically is a country with lower temperatures and darker days through clouds. Chocolate confectionery as a psychic means against depression and also as a powerful nutrition against cold thus has a long history in areas like these. Both these factors may explain the reason why Cadbury Schweppes, an European-originating company and its portfolio has such a revenue/origin variance in it.
After the merger several years ago, CSG’s international strategy seems to have evolved from a pure multidomestic portfolio strategy (annual report explicitly says: Fluctuations of Confectionery revenue stream has to offset the fluctuations of beverage revenue stream) to an increasingly complex global strategy (Porter, 1986, Figure 7). This means, CSG tries to leverage international business for example in the US and then tries to bring in other parts of that business (like the Schweppes brand) into the same territory - with a certain success.
This form of capability leverage is meant to generate additional revenue opportunities with lesser costs than a traditional expansion approach would bring.
[...]
1 Taken from Stock Portofolio of http://my.netscape.com, accessed last 11 Sept. 2000
2 Most analysts’ recommendations are extremely biased towards a “buy” rating, thus, “buy/hold” in consequence needs to be seen as the median - with three analysts reporting, two are neutral and only one is optimistic, then towards CSG.
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Laden Sie Ihre eigenen Arbeiten hoch! Geld verdienen und iPhone X gewinnen. -
Laden Sie Ihre eigenen Arbeiten hoch! Geld verdienen und iPhone X gewinnen. -
Laden Sie Ihre eigenen Arbeiten hoch! Geld verdienen und iPhone X gewinnen. -
Laden Sie Ihre eigenen Arbeiten hoch! Geld verdienen und iPhone X gewinnen. -
Laden Sie Ihre eigenen Arbeiten hoch! Geld verdienen und iPhone X gewinnen. -
Laden Sie Ihre eigenen Arbeiten hoch! Geld verdienen und iPhone X gewinnen.